Stressed loans; NPAs; Restructured Loans; Ever Greening of Loans ; Written off Loans


The gross NPA of banks has risen to 9.6 per cent (of total advances) in March 2017, from 9.2 per cent in September 2016, as per the RBI data.


Despite a series of steps to contain non-performing assets (NPAs), public sector banks (PSBs) wrote off a record Rs 81,683 crore worth of bad loans in the financial year ended March 2017, a jump of more than 41 per cent over the previous year’s write-off amount of Rs 57,586 crore, as per the finance ministry data



1.Non Performing Asset


A loan, Where no Repayment is received by the Bank for a period of 90 Days (One Quarter).

A loan can become NPA depending on many reasons. Either the debtor is not willing to pay it  back even after sound financial position. Such debtors are identified as ‘’Wilful defaulter’’.

For Example, Vijay mallaya was recently declared as Wilful defaulter.


2Restructured Loan When a Loan becomes NPA, the bank in order to recover, starts to relax the terms of loan.

For example extending the term of repayment, or decreasing the interest payment on the loan.

In certain cases the default party (not the willful), also gets additional loan amount from the bank.

If the party fails to complete its business operations successfully due to shortage of funds, then it is neither good for the party nor for the Bank. Thus bank extends more loan to the debtor to carry on with the business. But this creates one more problem called ‘’Ever Greening of loans’’. 


3.Written off asset Even after all possible help from the Bank, when the debtor party defaults to repay the loan, then that loan has to be declared as written off asset. Basically a dead loan on the balance sheet of a bank weakens the asset- liability position. I assume, you know that a loan is an asset for the bank, as it earns from it.

Example, recently SBI has written off the loan which was extended to Vijay mallaya. This move of SBI created anger wave in the Loksabha. But this does not mean that vijay mallaya has been pardoned for being a wilful defaulter. All possible legal Remedies will be utilized to get the loan money back.











About the author: Aman Kumar

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